IDB to help Indonesia set up US$1.5b fund

By Shahriman Johari,

January 4 2007, Business Times

THE Islamic Development Bank (IDB) is helping Indonesia to set up a US$1.5 billion (US$1 = RM3.51) fund which will invest in infrastructure projects in the country.

The fund could help kick-start big-ticket items like the construction of roads, houses and power plants, which is likely to draw interest from Malaysian firms.

However, the fund has yet to be finalised although talks started last year.

"It is a government-led deal. We are waiting for the Government. The discussion started some six months ago. It is still not finalised," Ahmed S. Hariri, director of the IDB's regional office in Kuala Lumpur, told Business Times in a telephone interview.

IDB may invest in the fund and it could also bring along other investors to subscribe, he said.

"We (could) both subscribe and we bring other investors along. Most investors are very comfortable with the IDB name. They will come along with the IDB name," Hariri added.

Companies from Malaysia, one of the top five foreign investors in Indonesia, have been active in the country, notably in the plantation and, more recently, banking sectors.

But there is strong interest in infrastructure projects as well.

Conglomerate Sime Darby Bhd is eyeing potential power plants in the country, while toll highway operator PLUS Expressways Bhd is looking for road projects.

In August last year, Indonesia's president, Susilo Bambang Yudhoyono, invited Malaysian firms to invest in the country's energy, housing and power sectors.

Companies can also bid for some US$150 billion worth of mega infrastructure projects, comprising power, roads, telecommunications, harbours and ports, spread over the next five years.

Indonesia also plans to offer more business incentives and create more economic zones to attract foreign investment.

The country has one economic zone on Batam island and hopes to have more on Riau and other nearby islands, Hariri said.

One recent example of Malaysian investment is gambling group Genting Bhd.

Through its associate Landmarks Bhd, it is investing in a RM4 billion tourism development on Bintan island. That project would have hotels, resorts and tourism attractions like wellness centres.

Bintan is close to Singapore, which is building casinos. Genting is one of the winners selected to build a casino on Singapore's Sentosa island.